Family Dollar’s secret weapon for supercharged stores

Three case studies from the Family Dollar and Procter & Gamble partnership

It’s a fact: You have access to more data than you could ever possibly analyze. And the number of ways to analyze it continues to grow as well.

Given your limited resources, how can you make the most of the data resources you have and gain access to some of the most advanced analytics techniques and technologies on the market?

Consider partnering with your supply chain cohorts on joint analytics projects. After all, you probably have similar goals and complementary data. Plus, they might have cooler technology than you do, like eye-tracking software and virtual caves.

Other benefits of partnering inside your supply chain? According to Scott Zucker, Senior Vice President of Merchandise Operations at Family Dollar, “You can become very insular if you don’t partner with others. Procter & Gamble is a global company with a global analytics program. Partnering with them for analytics means that all the thinking in the world is brought to bear on our projects.”

Family Dollar, a leading discount retailer in the United States, and Procter & Gamble, the world’s largest consumer products company, have been partnering on analytics projects for more than seven years.

Andy Walter, Vice President of Global Business Services at Procter & Gamble says his company made a strategic decision in 2010 to invest more heavily in analytics. “Retail is one area where we are investing with analytics. We look for strategic partners who want to co-invest with us and create new capabilities.”

Walter and Zucker spoke about their partnership, its benefits and results at the National Retail Federation conference in New York City earlier this week.

Getting started

Since the two companies combined have so much analytical horsepower, it would be easy to get overwhelmed and not know where to start. But Walter suggests starting with three basic questions: What is happening? Why is it happening? And how can we change the outcome?

“Why and how are more interesting questions, so it’s tempting to jump to those questions first,” says Walter. “But there’s a lot of value in first making sure you know what is going on. You can learn a lot by just asking why.”

Zucker suggests starting with a project that will benefit both companies. “Where you start and how fast you go with your analytics projects should all be driven by the business. If sales are an issue, for an example, that is a good place to start since you both have a vested interest in trying to solve that problem.”

Project 1: Circular testing and measurement

Two metrics that matter to Family Dollar are trips and baskets. Trips refers to the number of trips a customer makes to the store each year, and baskets are the items and amount of money spent in each trip.

To help improve the trips metric, Family Dollar works with Procter & Gamble to apply analytics to the design and effectiveness of its printed circulars. Family Dollar mails 32 ads per year for each of its more than 8,000 stores nationwide. “Circulars are the No. 1 vehicle that we have to drive trips to our store, so it’s really important to understand what is the best use of your spend to bring customers back into the store,” says Zucker.

Starting with the design of the circular, Procter & Gamble conducts eye-tracking research as consumers view the ads and then measures the effectiveness of the ad.

Starting with the design of the circular, Procter & Gamble conducts eye-tracking research as consumers view the ads and measures the effectiveness of the ad. Next, they track the results after the circular is mailed. “Did it drive consumers to the store? We evaluate what worked, why did it work and how can we apply success to other areas?” explains Walter.

Procter & Gamble conducts direct consumer research in multiple “first moment of truth” research centers around the world. The technology used to track eye movements on Family Dollar’s circulars is the same technology used to measure the effectiveness of P&G print ads and TV copy.

Likewise, Family Dollar has a large test-and-learn group. So the retailer is adept at taking data from multiple tests on every circular and isolating different iterations and variables to study each individually and understand the effects.

Project 2: Store operations

For the basket side of the business, Family Dollar and Procter & Gamble are analyzing in-store execution and effectiveness, specifically asking questions like, how do we convert more customers, drive higher sales and keep items stocked?

This area brings together Family Dollar data, Procter & Gamble data and third-party data to develop operational plans for each store. Procter & Gamble uses the term SAGE, which stands for “store as a growth engine,” and means, “How can we supercharge every store based on what they’re doing?” says Walter.

The week-to-week reporting pinpoints results for specific categories and predicts when items will run out of stock, so that individual stores know when to reorder and restock, which can make a large impact on sales.

For this and other joint projects, Procter & Gamble commits to improving sales of consumer goods categories for Family Dollar as a whole, not just P&G products. “If every report tells you the answer is Tide, I would have no credibility. They’re expecting us not just to grow P&G business but to grow the categories we’re in.”

“One thing our relationship is built on more than anything is integrity,” says Zucker. “It’s built on mutual trust.”

Project 3: Store design

P&G’s research centers around the world are equipped with store layouts and “virtual caves” for simulating store walk-throughs. This allows researchers to change the layout of the store on the fly and walk consumers through many different store designs.

Before 2005, Family Dollar used a single format for each of its stores, says Zucker. Not anymore. “Optimizing store design at the local level is the holy grail for retailers. It brings everything together, from ‘Where are the products?’ to ‘What effects shrinkage?’ And ‘What effects do lighting, signage and lines at the register have on the business?’”

According to Zucker, store design is a highly strategic, expensive and complex process, especially when making infrastructure and adjacency changes across more than 8,000 stores.

”You want to try and control for as many things as you can. Do you put apparel in front or back? Drag categories on the wall or in the aisle? It’s important that we partner with P&G to improve the whole store. If we can drive higher traffic and provide more convenience, P&G will benefit too.”

Zucker sees this project as the culmination of the seven-year journey between the two companies, which incorporates historical data and expertise from every other joint project into the store design project.

Results benefit both companies

As the two companies have continued to work together, the sale of Procter & Gamble products has increased at Family Dollar, and Family Dollar’s share of business for Procter & Gamble has increased consistently as well.

“The more data we can bring together and the more power we can bring to these problems, the more we can do with analytics,” says Walter.

Zucker agrees: “Ultimately, if we’re not successful, P&G’s not successful. And if P&G’s not successful, we’re not successful. There’s no better way to get there than sharing data and sharing analytics resources.”